Scary predictions about the price of a steak

2:01 PM, July 30, 2012

Detroit Free Press Restaurant Critic

The price of steaks on restaurant menus lately is breathtaking. A 16-ounce prime rib eye is going for around $40 at brand-name steakhouses -- and that's just for the beef with maybe a garnish of frizzled onions.

Those giant, aged, bone-in steaks that look like caveman weapons?

Try $60 and up.

If those prices seem high, wait until next year, when the Department of Agriculture predicts that this summer's extreme drought will push wholesale beef prices 4%-5% over today's already-elevated levels. (The drought is pushing up feed-corn prices so much that ranchers are reducing their herds, which will make fewer cattle available next year.)

But as Jay Bonahoom -- vice president of Wolverine Packing in Eastern Market -- explains it, the USDA's projections don't necessarily mean that menu prices for beef will increase by that same 4%-5%.

First, the government's estimated price increase is still just an educated guess, he says.

"Everybody starts there, with what the USDA says, but often (the government analysts) are wrong," says Bonahoom, whose family-owned wholesale distributing company sells all kinds of meat and seafood to thousands of customers throughout the U.S. and in several foreign countries.

Bonahoom says the USDA's projection is based on the lack of beef supplies -- but lower demand could change the equation, he says.

"The cattle herd is down 2% to 2.5%, so they're expecting prices to go up by that 4%. But if demand drops -- if the economy continues to get worse or doesn't get better -- then people will have less money to spend. And if they don't buy beef, it doesn't matter if there are fewer cattle -- prices won't go up," he says.

"But that's an unknown; no one can predict it. The person who writes the report could be wrong, just as easily as they could be right," he says.

At the same time, he says, other forces come into play to help keep beef and other menu prices from skyrocketing.

When prices for high-end cuts such as rib eyes and strip steaks begin climbing, chefs start looking for creative ways to use other beef cuts and begin featuring more beef alternatives such as pork, lamb and chicken. That trend became evident when the recession began after 2008, but Bonahoom thinks "there's a lot more room" for adjustments.

Restaurant chains are already coming to Wolverine for ideas on how to lower their menu costs, he says. And they've already begun buying more pork and chicken, he says, which "helps control beef prices from going runaway expensive."

Still, there's no getting around the fact that even now, a great steak in a fine restaurant costs a heckuva lot.

"Prices have gone up dramatically over the last year" -- primarily because of low cattle supplies resulting from last year's drought -- and some of the most desirable steak cuts have gone up "really, really high," he says.

Nevertheless, "People are putting steaks on the menu and they're still getting more expensive -- which just tells you that there's demand for those products."

With so many complexities and counterbalancing forces in the food supply-and-demand equation, no wonder Bonahoom says it's impossible to know exactly where our ever-rising beef prices will top out.

Restaurant owners -- especially those who lack the buying power of big chains -- are simply hoping for the best.

"Usually what happens is, we ride it out" when beef prices start climbing, says Jim Alex, co-owner of the 54-year-old Clawson Steakhouse in Clawson. Prices have been going up all year, and for the most part, "we're just holding fast." His best-selling 8-10 ounce filet is about $24.Others are also trying to avoid price hikes, he says. "We know a lot of our competition, and they know us, and we all work accordingly. ... We believe things go up like they always do: They go up and they come down. ... We're just hoping for the best." And so are we.